This year has been a historic one for federal cannabis reform, and it may be about to get even better. Last month, Congress hosted two public hearings on cannabis policy: The first focused on racial and social justice (see my coverage here), and the second focused on banking access for the cannabis industry.
Unlike a lot of what goes on in Congress, these hearings were not just for show. Following many hours of testimony on the banking issue, U.S. Sen. Mike Crapo (R-ID) made headlines by for the first time voicing his support for legislation that would give cannabis businesses access to the banking system, which every other business in the United States takes for granted. The importance of Sen. Crapo's support is mainly due to his position as chairman of the Senate Banking Committee, which hosted the hearing that was necessary to advance the SAFE Banking Act, a bi-partisan bill that would solve access to banking for the cannabis industry. But it’s also a sign of the times, as Sen. Crapo is not only a Republican, but a Republican from Idaho — one of only three states in the nation that has not passed any sort of cannabis legalization bill, even for access to CBD for medical purposes.
Just a few years ago, an Idaho Republican supporting cannabis banking would have been unthinkable; now it’s merely a pleasant surprise. But to those who watched the hearing, his newfound support may not be so surprising. The hearing began with testimony from the lead sponsors of the SAFE Banking Act: U.S. Sen. Cory Gardner, a Republican from Colorado, and U.S. Sen. Jeff Merkley, an Oregon Democrat. While they likely disagree on many issues, they’re working together to give cannabis businesses in their states access to the banking system.
The bill sponsors' testimony was followed by an expert panel that included representatives from a credit union, a bank, a state-regulated cannabis business, and, unfortunately, one staunch prohibitionist. The bankers talked about how difficult it is to work with cannabis businesses under current federal law, and asked for reform so that they could work with them like they already do with alcohol, tobacco, pharmaceutical, and myriad other businesses. The cannabis business representative explained how conflicting state and federal laws harm owners, employees, and customers. The prohibitionist attempted to distract the committee's attention with misleading information on the debunked gateway theory, teen usage, DUI, and pretty much anything but banking — since even most prohibitionists would admit that if cannabis is legal, it doesn't make sense to block cannabis businesses from using banks.
Along with many other businesses, non-profits, and cannabis reform advocates, I submitted my own written testimony, which you can read here. As an owner and employee of a so-called “multi-state operator” that runs cannabis cultivation, production, and dispensary facilities across the country, I’ve been personally impacted by this lack of access to banking services. Despite operating in clear compliance with the states’ medical marijuana programs, our businesses in multiple states have experienced the inefficiencies and safety risks of being forced to operate using only cash. As a quickly growing company, we just went public—but on the Canadian Securities Exchange because federal law prevents us from listing on the NASDAQ or other American exchanges.
More importantly, cannabis banking reform would benefit cannabis entrepreneurs who don’t look like me. We all know that communities of color have borne the brunt of the war on drugs, being targeted for enforcement at far higher rates than white people, despite using cannabis at roughly the same rate. Today, the vast majority of state-regulated cannabis businesses are run by white people. To address this, much attention has been paid to expunging criminal records for cannabis offenders and making sure that criminal records don’t prevent employment in the cannabis industry, both of which are common-sense measures to include in any legalization bill or ballot measure.
But even if someone is not legally prevented from obtaining a cannabis license, they still need hundreds of thousands (if not millions) of dollars to get a business started. In any other industry, an entrepreneur with a solid business plan could get a loan from their local bank, or even get support from the federal government through the Small Business Administration. Yet federal law prevents cannabis entrepreneurs from accessing either source of funding, forcing them to rely solely on friends, family, and other personal connections. The communities hit hardest by cannabis prohibition are also the least likely to have access to these high-net-worth individuals and networks, putting a state license far out of reach. The few entrepreneurs who can find wealthy backers have no choice but to sell equity in their business, while they could’ve simply taken a loan and retained all of their ownership if they were opening a bar or pharmacy instead of a cannabis dispensary. Banking reform would end this unfair system, and is an important tool in reducing the racial disparities in cannabis business ownership.
Banking access may seem like a niche issue that only businesses care about, but it impacts consumers and patients too. While you can use your credit card to buy alcohol or prescription medication, none of the major credit card processors are willing to touch cannabis products of any kind. In some states, like West Virginia, the banking issue has even halted the implementation of medical marijuana entirely, leaving patients without any legal way to obtain their medicine. It also harms the more than 210,000 people who work in the legal cannabis industry, faced with problems from getting their paychecks in cash, to being denied a mortgage just for working at a cannabis business. And the increased cost of managing cash or paying exorbitant fees to the few banks willing to open accounts for cannabis businesses means higher prices in the stores, something that particularly impacts medical cannabis patients whose federally illegal medicine is still not covered by health insurance.
Of course, ending federal marijuana prohibition entirely would fix these problems, and there are serious efforts underway to pass such legislation — most notably the MORE Act introduced in both chambers of Congress last month. But while prohibition remains on the books, banking reform is a necessary step forward that will help businesses, patients, consumers, and the regulators who are trying to make these state programs work. The SAFE Banking Act is the best way to do this, and Sen. Crapo is the one with the power to bring it to a committee vote and send it to the full Senate. Hopefully he’ll follow through on his comments soon, as cannabis banking reform could be one of the few issues that our current Congress is able to agree on.
